Associate technical skills...

you will get the same summer training, but you really become good/understand valuation by going through the process over and over. Direct promotes obviously are at a huge advantage. At some banks, associates do a decent amount of modelling/etc. At others, they just check over the model and concentrate on other issues (getting the pitch book in the right order, checking all of the numbers, helping coordinate a live process, etc). In the second case, associates can still acquire strong technical skills, you just have to be pro-active about it and play around with the model or build your own out. Some banks make their 1Y associates spend six months effectively as an analyst so that they can acquire the technical skills. In any case, there will come a time when all associates have to build a model or do something technical b/c they don't have an analyst on that specific project or the analyst is swamped with other things. I think its more about how much time you put into acquiring the skills (might have to spend an extra hour or two a night for the first couple of months tinkering/building out or on top of models)

Thanks napoleon. Another quick Q...

Let's say you're loading 3 years worth of BS data into a model and at the point of calc working capital, WC comes out negative for one or more base years. While this is not necessarily a bad thing and even reasonable for industries that operate cash intensive (e.g. restaurant, etc.) or businesses that make significant investment in operations etc., what do you guys do when you carry negative WC to the DCF analysis to calculate FCF? Do you guys just zero it out? What's the general practice?

Associates coming straight out of b-school w/o previous ibd experience are idiots and are not respected by analysts (since they suck).

Direct promotes are usually strong technically. The associate I used to work w/ while I was an analyst was absolutely beastly.

Elaborate... why was the associate beastly? Seriously, I'm curious...

Do you find that 1Y associates without prior IB experience, or even general corporate finance, valuation experience just "wing it"?

Can most associates walk you thru financial statement analysis? Valuation approaches? Troubleshoot a model with you?

From the analyst perspective, what differentiates the exceptional associate?

Associates who come in cold from an MBA are painful in the extreme - full of fancy notions about the job without the skills to actually know what needs to be done/ how long it takes to do stuff. Analysts working under such associates usually score very low on the will to live scale.

An exceptional associate from the analyst perspective should be able to teach you modelling and other skills, be able to see problems before they arise, get involved in a lot of upwards management and actually be decent human beings.

working with an associate straight out of b-school with no prior IBD work can be one of the worst experiences you will have as an analyst

gives me chills just thinking about it.

without prior IBD experience? Just seems counterproductive?

I'm meeting some of my competition for 1Y associate gigs who are from target B-Schools. I'm humbly from a non-target and opted to do a corporate finance/valuation role as a prelude to potentially transitioning to an IB position 1-2 years out. At least I was honest with myself that I need to "pay my dues". Feedback from recent interviews however infer "soft" tech skills. (Hands up in the air)

Yet, I'm gauging competing associates from target schools and they're simply forgiven lack of tech skills. Very frustrating.

I posed the WC question to a 1Y associate friend of mine who answered the question evasively. He's at a BB!

banks are looking for associates who can interact with clients and eventually (over time) bring in revenue.

you can teach a sociable guy how to model; a lot harder to teach a technical nerd social skills.

very true....its all good as long as you're not the one suffering while they hone their tech skills.

aadpepsi: the simple answer is you add it your free cash flow. thus, if wc is negative, you're subtracting it; if it's positive you're adding it.

this makes sense intuitively... in general (not always), as a company expands operations and generates more revenue, it will require more working capital to perform its services or manufacture its product. this represents a use of cash and thus a 'loss' so to speak of cash from your free cash flow line.

I posed the question to my friend from a BB and his answer was of a tone not to be challenged: "You zero it out, can't add negative WC to FCF, you disregard it for that base year"!?!

(Do U guys find morons who don't know what they're talking about try to slide one by you by talking faster and talking in their "power" voice?)

Mikesdaboss: the grand finale to the feedback which inferred "soft" tech skills? I was told I have "executive presence and wouldn't hesitate to put you in front of a client"!

Ay vay.

that was in response to aadpepsi's question posted earlier in the msg string.

and by the way, i just checked my technical reference manual, and it confirms what i said. what is your friend talking about?!

If the negative WC is found to be non-recurring, what's the adjustment made?

in general, technical skills (as far as banking goes) are a total crock of crap. regardless of how "sophisticated" the pro-forma statements, accretion/dilution analyses, and irr sensitivity tables become, the bottom line is that the math involved is never any harder than adding, subtracting, multiplying, and dividing.

granted, some people learn/catch on faster than others and are capable of moving up the modeling curve more rapidly than others, but at the end of the day, ANYONE can pick up modeling after enough repetitions. thus, from my experience, the associates who suck are the ones who are generally too lazy to put in the time and repetitions that are needed to truly understand their firm's "proprietary" model.

as far technical skills in an interview go, there's generally always cultural biases whether you like it or not. for the record, i'm not all that great at math... in fact, math has generally always been a struggle for me--i'm more of a liberal arts type guy. however, because i'm asian, people generally tend to assume that i'm good at math. as a result, i've NEVER been asked a single technical question in any banking interview i've ever had.

That's what I'm trying to say, without exactly saying so. My intuition is telling me that the conflicting feedback is coming from some other sensibility.

Listen, it's textbook, when executives are polled and asked what quality they prefer in employees, hands down the consensus is attitude, i.e. that someone with the right attitude + aptitude is a better catch than someone from X school. I'm always given high marks on attitude, poise, maturity, communication... all the soft skills. Never a problem.

However, in real life competition, MY credibility is questioned and tech skills scrutinized, even with a solid resume. I'm prepared for that. More so when I'm competing for positions that are so highly coveted. I'm even prepared to take 2 steps back to move 1 step forward to prove myself.

What I'm not prepared for is a dismissal based on "soft" tech skills, particularly when my interviews were based on "fit" and few high level tech Qs were even asked!

I also know the IB/CF/PE/Valuation industry is grounded on rolling up one's sleeves, throwing oneself completely into an analysis and in large part learn as you go. It's an iterative process. Judgement comes with time and experience.

PEanalyst and Monkey_Island, thanks for your discussion above! Totally appreciate it.

youre welcome!

now that you mention it, the funny thing about the work that bankers do is that it's all almost entirely 100% BS at the analyst/associate level (at least on the m&a modeling side--less so on the capital markets side).

in general, financial models are "best guesses." no one can really predict the future, so all they can do is provide an educated guess.

as a result, there's only 1 thing i can guarantee you is true regarding all financial models, and that's that they're all 100% wrong. the only questions are by how much and in which direction.

thus, if i was you, the next time some md/director/vp dinged me on "soft" tech skills, i would challenge the guy right back and ask him how much having "hardcore" tech skills really matters in the context of putting together a model when it's going to be clearly wrong at the end of the day anyhow. then i would shoot right back with the fact that even if there are certain technical areas that i was weak in, i'd easily be able to learn those areas through the sheer amount of time i'd be spending at work. what's more important is having good client presence and being able to sell/close a deal.

anyhow, although a good number of analysts might disagree, the bottom line at the end of the day is that the model is perhaps one of the least important items as far as the deal process is concerned. although it's useful in helping to establish 'valuation' boundaries, most senior deal makers will quickly move past the model after a rough idea of valuation has been created and move onto more substantive issues such as strategy and negotiation.

but now I'm upset again... I have a B.S. in Chemistry, 5+ years at Salomon Smith Barney prior to B-School and at least 1 year in at a corporate finance/valuation shop post-MBA and not an IB or MM offer on the table yet!

Just for shits... I should marry one of you asian boys, change my name and see if that helps!

those are good qualifications! i'm sure you'll get an offer -- hang in there.

Associates out of bschool don't know how the ibd world works so they don't know anything about pushing back on work and will ultimately make your life painful. Imagine running 20+ turns on a stupid presentation or model--this is easily avoided if you work for a direct promote who has suffered his own share of pain and wants to make his life as easy as possible, from which an analyst can benefit.

worked with an MBA from a top school that had no iBD experience before. One of the most painful and difficult times of my life. He was a "talker" but didn't really know his shit in a time I was still trying to get up the learning curve. needless to say he was gone before the first year was over...eventually enough analysts complained.

a sense of entitlement is an ugly thing...especially in IBD where if you don't pull your weight some people are really going to suffer.

I've done the scut level work, been there. I know what you guys are talking about, honestly.

I left my last position because I worked for a director who was an utter idiot, walking lawsuit. Beyond being a total shit head and just sloppy in his work product, he wreaked. I mean physically wreaked - his office had the aroma of armpits all the time!!! How do people like that make it up up up? It's a phenomena I'd like explained to me in simple english.

why do you want to do banking so badly? with credentials like yours you could do just as well in a fortune 500 corporate development group. you'd probably have more fun as well.

ive found that the biggest problem with these MBA guys with no experience is their ego (especially true for associates from top-notch MBA programs)

ive worked with such associates who go through 20-30 turns for a small-ass pitchbook and think the final product is the greatest thing ever made. meanwhile, i know that the book is a pos, but i just don't care enough to tell them that or fix it.

We learn to pick our battles, don't we?

For an internal corporate development role, most Fortune 500 expect candidates to have done at least a few years at an IBD.

e.g. I pursued a corporate development spot at Medtronic and was told they were really looking for someone who had already done healthcare M&A for a few years. Otherwise, they expect you to do market research for 4-5 years and then maybe lateral into a corporate development role. NOW, THAT'S AN UTTER WASTE OF TIME!!! I'd be old, tired and utterly disinterested by then.

It's maddening. I'm not beholden to do IBD, there are other related opportunities I'd consider. However 2-3 years even at the associate level at an IBD opens otherwise closed doors.

"Exit opps" is what we inquire about ad nauseum on this forum, right?

Ask any high-level banker (VP and above) and you will hear the same thing. First-year Associates out of b-school are light-years behind direct promotes, but the gap narrows very quickly, and by the end of everyone's second year on the Associate level, the MBA is well ahead.
This is because the MBA had work experience (likely with management responsibilities) before business school, while the direct promote has absolutely no management or leadership experience. He can model better and turn books faster, but that's all, and the higher up you go, the less that stuff is part of the job.

Ask any high-level banker (VP and above) and you will hear the same thing. First-year Associates out of b-school are light-years behind direct promotes, but the gap narrows very quickly, and by the end of everyone's second year on the Associate level, the MBA is well ahead.
This is because the MBA had work experience (likely with management responsibilities) before business school, while the direct promote has absolutely no management or leadership experience. He can model better and turn books faster, but that's all, and the higher up you go, the less that stuff is part of the job.

Ask any high-level banker (VP and above) and you will hear the same thing. First-year Associates out of b-school are light-years behind direct promotes, but the gap narrows very quickly, and by the end of everyone's second year on the Associate level, the MBA is well ahead.
This is because the MBA had work experience (likely with management responsibilities) before business school, while the direct promote has absolutely no management or leadership experience. He can model better and turn books faster, but that's all, and the higher up you go, the less that stuff is part of the job.